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I.I.I. Testifies on No-Fault Auto Insurance In Michigan

This report consists of testimony showing a summary of loss trends in the Michigan auto insurance market and and estimates of the benefits of proposed reforms to the state’s no-fault auto insurance system. The testimony was produced by Robert Hartwig, president of the Insurance Information Institute, and James Lynch, FCAS, MAAA, consulting actuary, for a special state insurance committee in Lansing. The report notes that Michigan’s auto insurance costs are among the highest in the country, and over the past few years they have risen faster than rates in the rest of the country. The price of auto insurance is influenced by a multitude of factors, but in Michigan much of the pressure on rates is attributable to the unique structure of the state’s auto insurance laws, particularly its no-fault auto insurance system. Specifically, the state’s exceptionally generous benefits and its lack of commonly used cost controls are pushing costs sharply upward—and at an unsustainable pace. Michigan is the only state that mandates unlimited benefits for no-fault insurance. No other state mandates limits above $50,000. This makes Michigan’s auto insurance system the biggest and possibly last blank check in the American health system. Michigan’s auto insurance system does not utilize medical fee schedules, such as exist in most other states and in other lines of insurance such as workers compensation. Again, the lack of basic checks and balances in the system leads to inflated claims costs and makes the system more vulnerable to abuse. The testimony is accompanied by a PowerPoint presentation consisting of 11 slides showing statistical data supporting the testimony.

James Lynch, FCAS, MAAA, Consulting Actuary to the Insurance Information Institute, testified before Michigan State Senate Insurance Committee on October 6, 2011.

The hearing focused on "No-Fault Auto Insurance Fraud In Michigan". You can download the testimony below: